Bank of America Admits To Repo 105-Like Fraud, Even As End Of Quarter Window Dressing Continues Unabated

In what will come as a complete lack of surprise to everyone, Bank of America has officially confirmed it "mistakenly" used Repo 105-type transactions on $10.7 billion in assets, which had been misclassified as sales rather than borrowings, or repos, in the period between 2007 and 2009. As Bloomberg reports, the bank used the excuse that a $10+ billion fraud is simply an rounding error so you must acquit: "Bank of America said the inaccuracies aren’t material and “don’t stem from any intentional misstatement of the Corporation’s financial statements and was not related to any fraud or deliberate error.” We are sure that late night comedians can come with enough material in which a $10.7 billion "mistake" is not material so we will leave it to them, and instead we will ask another question as pertains to the whole end of quarter window dressing theme: namely - why does it continue to this day? As per the FRBNY's public disclosure of Primary Dealer holdings, the week ended June 30 once again saw the traditional balance sheet collapse, with total PD assets as of June 30 closing once again at the lowest level of the entire quarter. This marks the 7th consecutive quarter in which primary dealer assets finished the quarter at or near the lowest exposure during the quarter, and 9 out of the last 10. But it's all fine - according to the SEC mangled rules of corrupt statistics (soon taught at a Princeton University near you), an event that occurs 90% of the time is not at all significant or notable.

To wit:

The US public accepts that the bankers have lied, cheated and stolen pretty much every day for the past century and the only thing we have to show for it is a $20 trillion debt tab in a few years. Yet that they continue doing so with impunity, even as they themselves now confirm they engaged in inadvertent fraud, just boggles the mind.

Here is another representation of PD weekly assets, with the EOQ positions highlighted in red.

We are willing to wager anything with anyone, that the New York Fed PD data week of July 7 will show a material increase in total assets now that the June 30 window dressing charade is over.

And while we are looking at Treasury Primary Dealer assets, he is a full breakdown of holdings in table form...

and in chart form...

The last week of June saw a drop in PD asset holdings of just over $14 billion - just enough to offset the massive outflows in equity mutual funds. And as the action in the past week demonstrates, this is money that sure was put to good use in bidding up risky assets. 

And lastly, for those interested in how primary dealers are bidding up treasuries, there may be some surprise to discover that as of June 30, treasuries of alll types held by the PDs dropped to a negative number for the first time since... March 31 (yes, the last time there was major window dressing going on).